MAR 250: Select Chapter Notes
MAR 250: Select Chapter Notes MAR 250
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This 13 page Bundle was uploaded by Melissa Cirasella on Tuesday September 15, 2015. The Bundle belongs to MAR 250 at Pace University taught by Martin in Spring 2014. Since its upload, it has received 11 views. For similar materials see Principles of Marketing in Marketing at Pace University.
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Date Created: 09/15/15
0 In the channel of distribution retailing is where customer meets the product 0 It is through retailing that exchange a central aspect of marketing occurs The Value of Retailing 0 Producers and consumers meet through actions and it creates customer value and impacts it39s economy 0 Consumers utilities provided 0 Economic value peoples employed in retailing and total amount of money exchanged in retail sales 0 Utilities offered by retailing time place form and possession Classifying Retail Outlets 0 Form of ownership 1 Independent retailer most common form of retail gt Owner can be own boss gt Offers convenience personal service and lifestyle comparability for customers 2 Corporate chain multiple outlets under common ownership Ie Macy39s gt Centralization in decision making and purchasing gt Advantages in dealing with manufacturers size of chain grows 0 Large chain can bargain with manufacturer to obtain good service or volume discounts on orders gt Buying powerconsumers compare prices to other stores 0 Consumers benefit because of multiple outlets with similar merchandise and consistent management policies 3 Contractual systems independently owned stores band together to act like a chain 1 Retailer sponsored cooperatives 0 Associated Grocers neighborhood grocers that agree with several other independent grocers to buy goods directly from food manufacturers 0 Members get volume discounts and impression of being a large chain 2 Wholesaler sponsored voluntary chains 0 Independent Grocers39 Alliance IGA try to have the same benefits 3 Franchises 0 Individualfirm franchisee contracts with parent company franchisor to set up businessretail outlet 0 Franchisor helps select location set up advertising and training franchisee pays one time franchise fee and annual royalty 0 Two types 0 Business format franchise e McDonalds franchisor provides procedures and guidelines for most aspects of business 0 Product distribution franchise Ie Coke franchisor provides few guidelines franchisee is more independent 0 Level of service 1 Self service customers perform many functions during the purchase process 2 Limited service provide some services such as credit and merchandise returns but not others like clothing alterations gt Customers are responsible for most shopping activities but salespeople are available in select departments 3 Full service most specialty stores department stores provide many services to customers 0 Type of merchandise line 1 Depth of line gt Limited line stores carry a considerable assortment of a related line of items e Sports Authority gt Single line stores carry tremendous depth in one primary line of merchandise e Victorias Secret gt Limited and single line storesspecialty outlets gt Specialty discount outlets focus on one type of product at very competitive prices aka category killers 2 Breath of line gt General merchandise stores carry a broad product line with limited depth Nonstore Retailing 1 Automatic vending vcommerce 0 Possible to serve customers when and where stores cannot 2 Direct mail and catalogs O Eliminates cost of store and clerks 0 Improve marketing efficiency through segmentation and targeting and create customer value by providing a fast and convenient means if making a purchase 0 Encourages customers to visit website social media page or store 3 TV home shopping 0 Consumers watch a shopping channel where products are displayed orders are placed over the phone or internet 4 Online retailing 0 Search evaluate and order products through the internet 0 Advantage 24 hour access ability to compare in home privacy and variety 5 Telemarketing 0 Uses the phone to interact with and sell directly to consumers 6 Direct selling door to door retailing 0 Direct sale of goods and services to consumers through personal interactions and demonstrations in their home office Retailing Strategy 0 Related to store positioning and the retailing mix 0 Retailing mix includes retail pricing store location retail communication and merchandise 1 Retail pricing gt Markup how much should be added to the cost the retailer paid for a product to reach the final selling price gt Original markup difference between retailer cost and initial selling price gt Maintained markup difference between final selling price and retailer cost aka gross margin gt Markdown discounting a product gt Off price merchandise is bought by the retailer from manufacturers with excess inventory at prices below wholesale prices 2 Store location gt Central business distinct gt Regional shopping centers gt Community shopping centers gt Strip mall gt Power center 3 Retail communication gt Important for positioning a store and creating its image 4 Merchandise b Two most popular measures for retailers are sales per square foot and samestore sales growth The Changing Nature of Retailing l The wheel of retailing O Describes how retail outlets change start with low status low margin stores 2 The retail life cycle 0 Describes stages of growth and decline for retail outlets 0 Stages of life cycle gt Early growth emergence of a retail outlet with sharp departure from existing competition market share gradually rises but profits are low because of start up costs gt Accelerate development both market share and profit achieve greatest growth rates 0 Multiple outlets established as companies focus on distribution 0 Some later competitors may enter 0 Key goal for retailers est dominant position in fight for market share gt Maturity some competitors drop out of market 0 Stores try to maintain market share and price discounting occurs gt Decline market share and profit fall rapidly 0 Find ways to discourage customers from moving to low margin mass volume outlets or high price high service boutiques Future Changes in Retailing l Multichannel retailing 0 Integrated channels make shopping simpler and more convenient O Allows retailers to reach broader profile of customers 0 Retailers benefit from synergy of sharing information among different channel operations 0 Influence effect complementary role of different communications and delivery channels 2 Managing the customer experience 0 Changing department stores to create social retailing experiences Wholesaling 1 Merchant wholesalers industrial distributor 0 Full service wholesalers gt general merchandise or fill time wholesalers carry broad assortment of merchandise and perform all channel functions 0 No depth within specific product lines gt Specialty merchandise or limited line wholesalers offer narrow range of products but have extensive assortment within product lines carried 0 Perform all channel functions gt Limited service wholesalers 0 Rackjobbers furnish racksshelves that display merchandise in retail stores perform all functions and sell on consignment to retailers 0 Cash and carry wholesalers take title to merchandise but sell only to buyers who call them pay cash for merchandise and furnish own transportation 0 Carry limited product assortment and don39t deliver extend credit or supply market information 0 Drop shippers or deskjobbers are wholesalers that own the merchandise they sell but don39t physically handle stock or deliver it Nature and Importance of Price 0 Price must be quotrightquot customers must be willing to pay it it must generate enough sales dollars to pay for the cost of developing producing and marketing the product and must earn a profit for company 0 Price equation Fmal PY IU 53 Vita nun iwes Auow ma j LEWM ham 0 Price is used to indicate value when it is compared to benefits quality durability of a product or service lmluc percuved bUKILfrtS pr I u 0 Profit equation m lTotnl rcvm TO l39 l CM l39S nll pna x inan39h lq sold FIX cd mm ua VAH blc cos F 6 Steps in Setting Prices Step 1 Identify pricing objectives and constraints 0 Pricing objectives b b Reflect corporate goals pricing constraints relate to conditions existing in the marketplace They are carried to lower levels of organization and can change depending on financial position of company success of products or segments of business 3 profit objectives 1 Return on Investment ROI or Return on Assets RCA 2 Managing for longrun profits company gives up immediate profit by developing quality products to penetrate competitive markets over the long term 0 Products priced low compared to develop cost expect to make greater profit later because of higher market share 39 3 Maximizing current profit targets can be set and performance measured quickly 0 Target return objective firm sets a profit goal determined by board of directors Sales Market share the ratio of a firm39s sales revenues or unit sales to those of the industry competitors plus the firm 0 Companies pursue market share objective when industry sales are relatively flat or decking Unit volume the quantity produced or sold Survival Social responsibility 0 Firm may forgo a higher profit on sales and follow a pricing objective that recognizes its obligations to customers and society Pricing constraints 0 The number of potential buyers affects the price a seller can charge 0 The greater the demand for a product the higher the price for they can set 0 In the long run a firm39s price must cover all the cost of producing and marketing a product if not the firm will fail 0 Business firms constantly try to control their costs 0 The newer the product and the earlier it is in its life cycle the higher the price that can be charged 0 Collectible items or fads have prices that may rise later in the product39s life cycle 4 Types of competitive markets 1 Pure competition gt Many sellers who follow the market price for identical goods 2 Monopolistic competition gt Many sellers who compete over range of prices 0 Nonprice comp also exists gt Some differentiation of products from competitors 3 Oligopoly gt Few sellers who are sensitive to each other39s prices gt Avoid price competition 4 Pure monopoly gt One seller who sets price for unique product Step 2 Estimate demand amp revenues 0 Estimating Demand gt The lower the price the higher the demand gt 3 key factors 0 Consumer tastes 7 Influence what consumers WANT to buy 0 Price and availability of similar products 0 Consumer income Affects what they CAN buy 0 Estimating revenue gt Revenues generated monies received by a firm for selling its products gt Demand curves lead to revenue concepts critical to pricing decisions total revenue average revenue and marginal revenue gt It is dangerous to extend the demand curve beyond the range of prices for which it really appHes gt Most demand curves are rounded or convex to the origin gt Total revenue curve is developed by multiplying the unit price times quantity for each of the points on the demand curve gt Marginal revenue is the slope of the total revenue curve 0 For any downsloping straightline demand curve the marginal revenue curve always falls at a rate twice as fast as the demand curve gt Price elasticity of demand 0 Quantity demanded usually decreases as price increases making price elasticity of demand a negative number 0 3 forms 0 Elastic demand exists when 1 percent decreases in price produces more than a 1 percent increase in quantity demanded increasing sales revenue gt Price elasticity is greater than 1 O Inelasticdemand is when a 1 percent decrease in price produces less than a 1 percent increase in quantity demanded decreasing sales revenue gt Price elasticity is less than 1 7 a O Unitary demandexists when the percent change in price is identical to the percentage change in quantity demanded so that sales revenue remains the same gt Price elasticity is equal to 1 0 Decisions involving price elasticity o The more substitg e lqf0ductocse ice has the moreilikely it is to be price elastic 0 Products and services considered to be necessities are price inelastic e Open heart surgery 7 0 Items that require a large cash outlay compared with a person39s disposable income are price elastic e Cars Step 3 Determine cost volume and profit 0 Costs or expenses are the monies the firm pays out to its employees and suppliers 0 5 cost concepts gt Total cost gt Fixed cost gt Variable cost gt Unit variable cost gt Marginal cost 0 Marginal analysis and profit maximization gt People will continue to do things as long as the incremental return exceeds the cost gt As long as revenue received from a sale of an additional product marginal revenue is greater than the additional cost of producing and selling it marginal cost a firm will expand its output of that product CH 14 S p 4 Select an appropriate price level 0 4 common approaches 1 Demand oriented gt Weigh factors underlying expected customer tastes and preferences gt Skimming pricing 0 Customers are not very price sensitive because they weigh the new products price quality and ability to satisfy their needs against the same characteristics of substitutes 0 Effective when I Enough prospective customers are willing to buy the product immediately at the high initial price to make these sales profitable 2 The high initial price will not attract competitors 3 Lowering price has only a minor effect on increasing sales volume and reducing the unit costs 4 Customers interpret the high price as signifying high quality gt Penetration pricing 0 Effective when 1 Many segments of the market are price sensitive 2 A low initial price discourages competitors from entering the market 3 Unit production and marketing costs fall dramatically as production volumes increase 0 A firm using penetration pricing may 1 Maintain the initial price for a time to gain profit lost from its low introductory level 2 Lower the price further counting on the new volume to generate the necessary profit gt Prestige pricing 0 Stay above the initial price gt Price lining 0 Provide products that are meaningful gt Odd even pricing gt Target pricing 0 Anticipate what customers are willing to pay and then set the price accordingly gt Bundle pricing 0 Consumers value the package more than the individual items gt Yield management pricing 0 Continually matches demand and supply to customize the price for a service 2 Cost oriented gt Price setter stresses the cost side of the pricing problem not the demand side gt Price is set by looking at the production and marketing costs and then adding enough to cover direct expenses overhead and profit 0 Standard markup pricing 0 High volume products have smaller markups than low volume products 0 Cost plus pricing 0 2 forms 1 Costplus percentage or cost pricing a fixed percentage is added to the total unit cost 0 Used for one or few of kind items 2 Cost plus fixed fee pricing a supplier is reimbursed for all costs regardless of what they turn out to be but is allowed only a fixed fee as profit that is independent of the final cost of the project 0 Commonly used for pricing business products 0 Experience curve pricing 3 Profit oriented gt Target profit pricing 0 No benchmark of sales or investment used to show how much of the firms efforts is needed to achieve the target gt Target return on sales pricing 0 Project sales by sectarian volumes that will be sold and set price accordingly gt Target return on investment pricing 4 Competition oriented gt Price setter can stress what competitors or quotthe marketquot is doing 0 Customary pricing 0 Above at or below market pricing 0 Above most expensive product 0 At establish the going market price in the minds of their competitors and provide a reference price for competitors that use above and below market pricing 0 Below business to business marketing 0 Loss leader pricing Step 5 Set list or quoted price 0 2 pricing policies 0 One price policy fixed pricing gt No variation in price 0 Flexible price policy dynamic pricing gt Gives sellers considerable discretion in setting the final price in light of demand cost and competitive factors gt Yield management is a form of flexible pricing because prices vary by an individual buyer39s purchase situation company cost considerations and competitive conditions gt Some customers pay more and some pay less for the same product or service 0 Effects on pricing 0 Company effects gt For a firm with more than one product a decision on the price of a single product must consider the price of other items in its product line or related product lines in its product mix gt Product line pricing involves I The lowest priced product and price 0 Traffic builder designed to capture the attention of the hesitant or first time buyer 2 The highest priced product and price 0 Positioned as the premium item in quality and features 3 Price differentials for all other products in the line 0 Should make sense to customers and reflect differences in their perceived value of the products offered 0 Customer effects 0 Competitive effects gt Consider price cutting only when one or more conditions exist 1 The company has a cost or technological advantage over its competitions 2 Primary demand for a product class will grow if prices are lowered 3 The price cut is confined to specific products or customers and is not across the board Step 6 Make special adjustments to list or quoted price 0 Discounts any reductions from the list price that a seller gives a buyer as a reward for some activity if the buyer that is favorable to the seller 0 4 types gt Quantity 0 Noncumulative 0 based on the size of an individual purchase order 0 Encourage large individual purchase orders not a series of orders 0 Cumulative 0 Apply to the accumulation of purchases of a product over a given time period typically a year 0 Encourage repeat buying by a single customer to a far greater extent than noncomulative discounts gt Seasonal 0 Encourages buyers to stock inventory earlier than their normal demand would require gt Trade functional 0 To reward wholesales and retailers for marketing functions they will perform on the future 0 Reductions are offered to resellers based on 1 Where they are in the channel 2 The marketing activities they are expected to perform in the future gt Cash 0 Encourages retailers to pay their bills quickly 0 Retailers provide cash discounts to consumers to eliminate the cost of credit granted to consumers in the form of discount for cash policies 0 Allowances reductions from list or quoted prices to buyers for performing some activity 0 2 types gt Trade in A price reduction given when used product is part of the payment on a new product 0 Effective in lowering the price a buyer has to pay without formally reducing the list price gt Promotional 0 Geographical adjustments 0 Made by manufacturers or wholesales to list or quoted prices to reflect the cost of transportation of the products from seller to buyer 0 2 general methods 1 FOB origin pricing free on board 2 Uniform delivered pricing 0 4 methods 1 Single zone pricing all buyers pay the same delivered price for the products regardless of their distance from the seller 2 Multiple zone pricing a firm divides it39s selling territory into geographic areas or zones gt The delivered price to all buyers within any zone is the same but prices across zones vary depending on transportation cost to the zone and the level of competition and demand within the zone 3 FOB with freight allowed pricing freight absorption pricing the price is quoted by the seller gt The buyer is allowed to deduct freight expenses from the list price of goods so the seller agrees to quotabsorbquot transportation costs 4 Basing point pricing 5 Legal and regulatory aspects of pricing 1 Price fixing gt Horizontal price fixing when two or more competitors explicitly or implicitly set prices gt Vertical price fixing controlling agreements between independent buyers and sellers where sellers are required not to sell products below a minimum retail price Price discrimination eceptive pricing price deals that mislead consumers 2 3 D 4 Geographical pricing 5 Predatory pricing The promotional mix can be used to 0 Inform prospective buyers about the benefits of the product 0 Persuade them to try it 0 Remind them later about the benefits they enjoyed by using the product The Communication Process 0 Six elements of the communication process source message channel of communication receiver and process of encoding and decoding O Encoding and decoding gt Decoding is performed by the receivers according to their own frame of reference their attitudes values and beliefs gt Errors within communication 0 The source may not adequately transform the abstract idea into an effective set of symbols 0 A properly encoded message may be sent through the wrong channel and never make it to the receiver 0 The receiver may not properly transform the set of symbols into the correct abstract idea 0 Feedback may be so delayed or distorted that it is of no use to the sender 0 For message to be communicated effectively the sender and receiver must have a mutually shared field of experience 0 Feedback gt Feedback loop consists of a response and feedback gt Pretesting ensures all messages are decoded properly 0 Noise The Promotional Elements 0 5 promotional alternatives gt Advertising 0 Uses mass selling because used with groups of prospective buyers 0 The space for advertising must normally be bought 0 Nonpersonal advertising mass media bc they don39t have immediate feedback loop like personal selling 0 Advantages gt Once message is created the same message is sent to all receivers in market segment gt If ad is protested properly an advertiser can ensure the ad39s ability to capture attention 0 General advantages 0 Attentiongetting 0 Communicate specific product benefits to prospective buyers 0 By paying company can control what it wants to say and to some extent to whom the message is sent 0 Allows company to decide when to send its message 0 Disadvantages O The cost to produce and place a message is high 0 Lack of direct feedback makes it difficult to know how well message is received 0 Personal selling gt Uses customized interaction between seller and prospective buyer gt Face to face communication between sender and receiver gt Advantages 0 Salesperson can control to whom the presentation is made reducing the amount of waste coverage or consumers who are not in the target audience 0 Seller can see or hear potential buyer39s reaction to message if feedback is not good message can be modified gt Disadvantages 0 Flexibility different people can change message so no consistent communication is given to all customers 0 High costmajor dis most expensive promotional element 0 Public relations gt Uses mass selling because used with groups of prospective buyers gt PubHchy 0 Company does not pay for space in a mass medium but attempts to get the medium to run a favorable story on company 0 Adv credibility 0 Disadvantage 0 Lack of user control over it 0 Sales promotion gt Uses mass selling because used with groups of prospective buyers gt Advantage 0 Short term nature of programs stimulates sales for their duration 0 Offering value to consumers discount may increase store traffic from consumers who are not loyal 0 Direct marketing gt Uses messages customized for specific customers gt Interactive communication gt Adv 0 can be customized to match the needs of specific target markets 0 Messages can be developed and adapted quickly to facilitate one to one relationships with customers gt Disadv 0 Requires comprehensive and up to date database with information about the target market 0 Developing and maintaining the database can be expensive and time consuming Integrated Marketing Communications Developing the Promotional Mix 0 Putting together promotional mix 1 Balance of elements must be determined gt Factors affected 0 Target audience for promotion stage of product life cycle characteristics of product decision stage of buyer and channel of distribution 2 Coordinating promotional effort is necessary gt Promotional planning process designed to ensure integrated marketing communications can facilitate goal 0 The target audience 0 The product life cycle 0 Introduction stage to inform consumers and increase awareness gt All promotional mix elements are used advertising and publicity 0 Growth stage goal is to persuade consumer to buy product gt Primary element is advertising which stresses brand differences gt Personal selling used to solidify channel of distribution 0 Maturity stage need is to maintain existing buyers and advertising39s role to remind buyers of the product39s existence gt Sales promotions are important in maintaining loyal buyers gt Direct marketing mail used to maintain involvement with existing customers and to encourage repeat purchases 0 Decline stage period of phaseout for product and little money is spent in promotional mix 0 Product characteristics 0 Complexity the technical sophistication of the product and the amount of understanding required to use it gt More complex greater influence on personal selling 0 Risk financial risk social risk and physical risk 0 Ancillary services pertain to the degree of service or support required after the sale 0 Stages of the buying decision 0 Prepurchase stage gt Advertising is more helpful than personal selling because advertising informs the potential customer of the existence of the product and the seller 0 Purchase stageimportance of personal selling is highest and impact of advertising is lowest 0 Post purchase stage gt Sales person is still important satisfy the buyer gt Advertising is important to assure the buyer made the right purchase 0 Sales promotion
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